1. Field of the Invention
The present invention relates generally to electronic commerce and more particularly to conducting an interactive auction over an electronic network.
2. Description of the Related Art
Auctions usually take the form of a physical gathering of bidders assembled together within an auction house. Auctions presenting more valuable, collectible merchandise, such as art, coins and antiques, are often preceded by preparation of a catalog of merchandise, circulated to interested parties in advance of the gathering at the auction house, where bidding by those physically present will take place. For auctions of more mundane items, such as household possessions, estate sales and the like, the interested bidders simply appear at the appointed time and place and bid on merchandise in which they are interested.
Traditional auctions requiring a bidder's physical presence disadvantageously require that the merchandise lots up for sale be available at the auction venue for inspection by the bidders and subsequent pickup by the successful bidders. For many types of merchandise it would be far easier for both buyer and seller to leave the inventory at its original source and ship purchased items to the successful bidders at the end of the auction. Moreover, physical auctions have the still further disadvantage that only one item may be auctioned at a time. The auctioneer solicits bids from the floor for a given lot, but once the highest bid has been accepted, the lot is closed and the next lot brought forward. This sequential processing combined with the finite amount of time available to a gathered group is inherently limiting because multiple lots cannot be auctioned simultaneously to the same group of people during their limited period of availability.
Some changes in bidding requirements have made traditional auctions somewhat more convenient for bidders. Many auction firms allow bidders to submit their bids in advance of the auction. Advance bidding may be done by mail as a convenience to the bidders so that they do not have to be physically present at the auction. Also, the advent of the telephone and facsimile machine allowed bidders to submit bids in near real-time during the course of an auction. These technologies free the bidder from being physically present at the auction, thereby saving time and travel expense. To incorporate these technologies into the traditional auction format, representatives of the auction firm receive telephone or facsimile bids from their clients and alert the auctioneer of these new bids. Similarly, the representatives may relay information about the current bid items, such as the current high bid, back to the telephone bidders.
Bidding by mail or facsimile suffers a significant disadvantage as compared to bidding in person or by telephone because the mailing or faxing bidder has no opportunity to increase a bid in quick response to competitive bids received from the floor or by telephone. Moreover, although telephone bidding allows the bidder to avoid travel expense and inconvenience, traditional auctions may be scheduled at inconvenient times for many remote bidders. Also, because of the large number of items or lots sold in a typical auction, which can number in the eight hour period in order to be present when the few lots in which the bidder has an interest come up for sale. The lots in which the telephone bidder is interested may be scattered throughout the lengthy traditional auction. Time zone differences further diminish the appeal of telephone bidding for an international potential customer base.
All of these limitations and disadvantages of physical auctions, even when telephone bidding or bidding by facsimile is permitted, serve to discourage a large number of bidders and ultimately leads to lower selling prices to the economic detriment of the auctioneer and seller.
Electronic auctions held over the Internet using electronic mail (E-mail) have provided a minor innovation as compared to more traditional physical options. In E-mail auctions, an auction catalog is electronically mailed to people interested in bidding. Subsequently, bidders submit their bids on individual lots to an auctioneer via E-mail. The auctioneer reads the electronic mail bids and enters them in a database of bids. When the auction closes, the auctioneer notifies the winning bidders, usually via electronic mail, and ships the merchandise to the winning bidders.
There are several disadvantages to E-mail auctions. First, a human auctioneer is required to prepare the auction catalog and to read and process the electronic mail bids. This takes a considerable amount of effort in a large auction. Secondly, it is difficult to keep the bidders updated as to the current high bids on the various items. Electronic mail on most large public networks, such as the Internet, is lower priority traffic than most, meaning it can take several hours for bids to reach the auctioneer and for bidding updates to reach the bidders. Thirdly, as the auction closing draws near, the volume of bids may prohibit the auctioneer from sending out high bid information to the bidders because of the time involved in reading the electronic mail bids and in entering them into the bid database.
A recent innovation applied to E-mail auctions is the use of the Internet's World Wide Web (WWW) facility to post descriptions of the merchandise and show the current high bids. This innovation provides the advantage of eliminating the need to electronically mail bidding updates to bidders. And since WWW traffic is much higher priority on the Internet, bidders suffer less of a time lag in seeing updated Web pages. However, a human auctioneer is still involved and is required to manually process the electronic mail bids, enter them into the bid database, and to update the World Wide Web pages with current high bid information.
Sales firms other than auction houses have also used the Internet's World Wide Web facility to post descriptions of their merchandise and to offer the merchandise for sale at a set price. These systems are automated and are capable of accepting an order from a customer by having that customer fill out an online order form. This order information is taken by the system and placed into an order database or accounting system which then processes the order. However, such systems sell merchandise only at a fixed price and do not allow merchandise to be auctioned off, or to have their prices dynamically adjusted in an interactive manner in response to bids and other market conditions such as supply and demand.
Security brokerage firms for years have used automated transaction systems for matching buy and sell orders for securities. For example, the New York Stock Exchange's DOTS (Direct Order Transmission System) and the NASDAQ's SOES (Small Order Execution System) systems offer complete electronic matching of buyers and sellers. However, these systems do not operate an auction. They merely pair buy orders with sell orders when the pricing criteria of both sides of the trade are met.
A number of issued U.S. patents relate to various forms of electronic commerce. These patents fall into three broad categories: 1) patents relating to on-line networks, 2) patents relating to electronic commerce over on-line networks, and 3) patents related to various forms of securities (e.g., stocks and futures) trading via electronic means. From the first of these groups, on-line networks, U.S. Pat. No. 5,406,475 entitled Data Processing Network Having A Plurality Of Independent Subscribers, U.S. Pat. No. 5,235,680 entitled Apparatus And Method For Communicating Textual And Image Information Between A Host Computer And A Remote Display Terminal, and U.S. Pat. No. 5,310,997 entitled Automated Order And Delivery System, are representative of the prior art. These patents describe systems of terminals connected over wide area networks to centralized computers. However, they do not disclose the details of electronic commerce or auctions in particular.
In the second group, patents relating to electronic commerce, U.S. Pat. No. 5,285,383 entitled Method For Carrying Out Transactions Using Electronic Title, and U.S. Pat. No. 5,297,031 entitled Method And Apparatus For Order Management By Market Brokers, describe various means for conducting transactions over electronic communications networks. They also describe various means for displaying merchandise for sale to a plurality of customers connected to a central computer of a computer network and various means for conducting simple sale transactions where a buyer purchases an item at the stated price. As a group, these patents do not disclose the means for conducting electronic auctions or any sales format other than a simple or "straight" sale.
One particular U.S. Pat. No. 4,789,928, discloses a means for soliciting bids over an electronic network from bidders that are remote to the site of a live auction. This system records bids from remote bidders and simultaneously transmits the current high bid from the floor of the physical auction to the terminals of the remote bidders. However, this patent does not disclose or suggest the concept of an electronically conducted auction including a means for automatically closing the auction under certain conditions and without benefit of a live human auctioneer. Furthermore, this patent fails to disclose or suggest a means for auctioning a plurality of items simultaneously; rather, the disclosed system is strictly tied to the sequential proceedings of a physical auction. Finally, this system contemplates only a simple "highest bidder" auction where a single lot goes to an individual high bidder. This system cannot handle a lot available for auction which includes a plurality of items and where a plurality of winning bidders sufficient to match the plurality of auctioned items exists.
In the third group of patents related to electronic commerce, patents relating to securities trading, U.S. Pat. No. 4,412,287 entitled Automated Stock Exchange, and U.S. Pat. No. 5,077,665 entitled Distributed Matching System, disclose means for prospective buyers to post offers to buy a given security at a specific price and for prospective sellers to post offers to sell a given security at a specific price. These automated systems maintain lists of buy and sell orders. If an offer to buy a security is placed at a price greater than or equal to an existing offer to sell that security at a given price, these systems will automatically consummate the trade by matching the buyer with the seller. While the securities industry uses, and these patents disclose, such terms as "auction" and "bid", they are actually referring to the process of matching a set of buyers' bids with a set of sellers' prices. There is no auction in the true sense of a plurality of bidders simultaneously bidding in a manner accessible to all bidders and sellers in order to achieve a high selling price. In fact, these patented systems do not include disclosure of the list of open buy or sell orders, thus depriving the seller of the ability to openly solicit the highest price for securities. Instead, the market price of securities sold through these automated systems fluctuates up and down based upon the last successful match between an open buy order and an open sell order when both the buyer and seller have placed orders at compatible prices. There is no ability in such systems to conduct truly competitive and open bidding.
The present invention overcomes the above-listed drawbacks of the background art by providing a method and system for conducting auctions and mark down sales of merchandise over a computer network without the aid of a human auctioneer. The system is open to bidders anywhere in the world, leading to increased bid activity. Complete and thorough descriptions of all offered merchandise may be placed on-line, since the costs associated with printing auction catalogs are minimized in an electronic medium. An auction within the inventive system may be conducted over a period of time, mitigating the problems of inconvenient scheduling and time zone differences. A variety of auction formats can be employed within the inventive system depending on the type of merchandise being sold. And finally, the method and system of the present invention can be conducted automatically without the need for a human auctioneer, thereby allowing for a large number of items to be continuously auctioned.